Budget 2017: What it means for the food and drink industry

Many in the food and drink industry have welcomed the Chancellor of the Exchequer's announcement in his Budget that the move from the Retail Price Index (RPI) to the Consumer Price Index (CPI) will be brought forward by two years to April 2018

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Business rates revaluations will now take place every three years rather than five years, starting after the next revaluation which is due in 2022.

Philip Hammond also revealed that the National Living Wage and the National Minimum Wage will increase from April 2018. The National Living Wage for those aged 25 and over will increase from £7.38 per hour to £7.50 per hour.

The drinks industry has welcomed the news that the duty on beer, cider, wine and spirits will not rise in keeping with inflation, although low-price and high-strength cider will be subject to a new band of duty.

“This [business rates] is a hugely welcome and positive move. From being caught in a web of competing pressures from all parts of the economy, limiting the scope for action, it’s clear that the Chancellor has listened to the retail industry and the growing chorus from across business and commercial life who have spoken up in favour of action to mitigate rising rates bills. Crucially, this relief will unleash investment that retailers want to direct towards the needs of their customers. This will be particularly critical at a time when shoppers’ disposable income is being squeezed further and the growth projections for the economy have been downgraded.

“Introducing three-yearly revaluations is also a positive move to improve fairness of the system. These are encouraging first steps, so now is the time to commit once and for all to putting the rates system on a more affordable and sustainable footing, to support local communities, shops and jobs. We are keen to work with Government to deliver on that.

“We welcome the Government’s approach to the National Living Wage for 2018. In a challenging environment, the retail industry has worked hard to implement the National Living Wage, with many paying beyond the legal requirement, as well as extending the rate to all staff irrespective of age.

“Wage growth in retail continues to outpace the economy-wide average. Maintaining productivity gains remains crucial to sustaining this wage growth as employers contend with recent and upcoming changes to statutory employment costs. Therefore, it’s important that future increases continue to be moderate to reflect this and are subject to a fully independent Low Pay Commission.

“The announcement of an investigation into how a tax on single use plastics can reduce waste is interesting. It begs a number of questions about how the scope of any taxes might work, the timeframe for introducing them, what Ministers hope to do with the receipts, and the impact on consumers and businesses.

“We look to Government to ensure this investigation takes a comprehensive approach to waste, recycling and the circular economy, of which single use plastics and drinks bottles are but one component. Decisions on specific products need to be taken in the context of the circular economy where all resources are valued and reused. We also still await Defra’s 25 Year Environment Plan and a waste and resources strategy. What is needed is a broad, coherent approach rather than numerous piecemeal announcements and initiatives.”

Meurig Raymond, president of the National Farmers’ Union (NFU) said:

“We are disappointed to see no meaningful measures to help prepare farming businesses for life outside the EU in today’s Budget statement. With most of the emphasis on urban growth, there is little in the way of measures to benefit rural communities.

“We do, however, appreciate that this is a fairly stable Budget that does not appear to have any adverse impact on our industry.

“In these times of uncertainty, and ahead of significant upheaval, we need to have sustainable and viable businesses producing the nation’s food. Our calls to create the right environment for investing in farming, to mitigate risks, are yet to be answered.

“We will look with interest to next week’s Industrial Strategy launch and hope it will include specific measures to support the agri-food sector.

“Farming meets 61% of the nation’s food needs and forms the bedrock of the UK food and drink sector which contributes £112bn1 to the nation’s economy and provides 3.8 million jobs. Farming makes a significant economic contribution as well as caring for our iconic British countryside and putting safe, affordable British food on tables across the country.

“British farmers perform a unique and irreplaceable role in delivering these contributions. Increasing the nation’s ability to produce food needs to be seen as a strategic goal for Government and we will work in partnership with Government departments to establish the best possible business environment for our members.”

Mike Cherry, national chairman at the Federation of Small Businesses (FSB) said:

“Overall, this is a business-friendly Budget. The Chancellor’s vision for an inclusive economy includes a set of measures that will boost confidence across the small business community as they face extremely challenging trading conditions.

“1.5 million modest-earning small firms and the self-employed will be relieved that we have seen off a VAT tax grab that would have caused huge economic damage. Instead, FSB is ready to work with the Treasury to simplify an over-complicated tax that on average takes a business a whole week to administer every year.

“We welcome the careful approach to protect diesel van drivers while at the same time addressing air quality. We also welcome the fuel duty freeze, which is vital to so many local businesses for customers, suppliers and staff.

“FSB presented a series of reforms to the Chancellor to make the business rates system fit for the future, and we are delighted to see many taken on board to improve a tax that so badly undermines economic growth. We are particularly proud to see the elimination of the staircase tax, a victory that FSB has campaigned hard to secure over the last few months.

“The economic outlook remains extremely troubled, with high costs of doing business and inflationary pressures hitting confidence and deteriorating productivity and growth. New public sector headline investment will help, to scale-up the British Business Bank by two thirds as well as in research & development, local infrastructure, SME house-building, broadband and training. This must now be followed by practical detail in an ambitious Industrial Strategy next week.”

James Lowman, chief executive of the Association of Convenience Stores (ACS) said:

“Taken overall, this budget will have a net positive effect on local shops, which is good news for these important businesses and the communities they serve.

“We welcome the introduction of more frequent revaluations but only if this doesn’t place more burdens on retailers to assess and relay information on their properties to the Government. The introduction of more frequent revaluation must be delivered hand in hand with a simplification of the business rates system, where possible removing the smallest business from the burden of rates.

“The move from RPI to CPI for business rates indexation will reduce rates bills for local shops. However, the Government needs to ensure that existing reliefs are getting through to local shops that need it, currently 81 councils still haven’t set up schemes to distribute discretionary rate relief despite this being announced and funded in the March 2017 budget.

“The 4.4% increase in National Living Wage will mean retailers have to make tough choices in order to maintain staffing levels by delaying investment, reducing staff hours or reducing the number of people employed in their stores. We will continue to work with the Government to help them understand the impact the employment costs are on having on the convenience sector.”